Indonesia's financial regulator has changed its rules governing investments by insurance companies and other non-bank financial institutions, in a move aimed at getting these entities to support government infrastructure projects, reported Reuters.
The OJK revised a regulation first implemented in January last year that required insurance companies, pension funds and other non-bank financial institutions to keep a minimum percentage of government bonds in their portfolio to help provide stability to the debt market.
In the revised version, the OJK has expanded the options for required investment products to include instruments issued by state-owned companies and their subsidiaries used to finance government infrastructure projects.
The new list of instruments includes asset-backed securities, as well as the so called limited participation mutual funds (RDPT), according to the regulation signed on 29 August, which took effect immediately.
Accelerating infrastructure projects is among the main focuses of Indonesia's government and project financing is one the main hurdles.
The World Bank estimated that Southeast Asia's largest economy would have to spend US$500 billion to meet its infrastructure needs in the next five years and public spending alone would not be enough.
The overall amount of government-linked securities the OJK requires non-bank financial institutions must keep as a minimum percentage of their investments remains unchanged from last year's rules. Such securities must make up at least 30% of pension funds' and life insurance companies' investments and 20% of general insurance firms' investments.